How does a note receivable differ from accounts receivable?

• A. A note receivable is an unwritten claim without a formal note; accounts receivable is a formal note with interest.
• B. A note receivable bears no interest and has no fixed due date; AR is a formal note with fixed due date.
• C. A note receivable is a formal written promise with interest and a fixed due date; accounts receivable is an unwritten claim without a formal note.
• D. A note receivable is always current; accounts receivable is always long-term.

Answer: (C)

The key idea is the difference between a formal instrument and an informal credit arrangement. A note receivable is a formal written promise to pay that includes a specific due date and usually an interest rate, making it a negotiable instrument. Accounts receivable, on the other hand, comes from normal credit sales and is an informal claim to be paid, with no formal note and typically no stated interest. That contrast is why the correct description states that a note receivable is a formal written promise with interest and a fixed due date, while accounts receivable is an unwritten claim without a formal note. The other statements mix up formality, interest, and timing—notes can be short or long term, AR is usually short term, and AR generally does not involve a formal interest-bearing instrument.